Every year, the price of the most basic of treatment services within Southwest Florida's largest hospital system — using an inpatient bed — goes up 5 percent.
Oscar Santiago Torres and Frank Gluck, Fort Myers News-Press

It’s a medical cost that hospital patients probably don't notice on their bills and maybe never even think about.

Yet, every year without fail, the price of this most basic of treatment services within Southwest Florida's largest hospital system — using an inpatient bed — goes up 5 percent. Expect the same this year.

On the low end, that means the preinsurance cost of a daily stay for “routine” care is $1,464 for the next year, up from $1,394. The costliest rates, those for intensive care unit stays, went from $3,522 to $3,699 per day.

Stephen Brown, chairman of Lee Health's elected board of directors, has been a longtime opponent of the yearly increases. But he now says he sees them as a necessary, if unpleasant, means of keeping the hospital system's books balanced.

Almost half of the $1,394 cost for a room at a Lee Health hospital in 2017 went for nursing and nursing administration.(Photo:
Getty Images/Wavebreak Media
)

"It's a matter of responsibility with the finances. That's the best way for us to stay solvent," Brown said, adding that Lee Health set rates to make up for Medicare and Medicaid not paying hospitals the true costs of treatment. "I just hate our entire system. The games institutions have to play just seem so wrong to me, but that's the way they do it."

Though hospital room rate charges are commonplace, the publicly operated Lee Health is unique in that its elected 10-person board must specifically consider and debate them separate from its approval of the overall spending plans for the year.

The budgetary tradition provides a glimpse into how health care organizations determine the cost of things and, by extension, help drive the steady rise in medical inflation.

Hospitalized patients, on average, stay four to five days at Lee Health, meaning even modest upticks in room and board costs can lead to many more thousands of dollars on a patient's bill.

But it's important to note that few patients actually pay those amounts. Instead, the annual increases apply to rates appearing on the hospital system’s official list of prices, known as a “chargemaster.”

(Note: As of Jan. 1 the federal government is requiring hospitals to publicly post its chargemaster prices for various medical procedures — something Lee Health has done for years.)

Because Medicare and other insurance providers set or negotiate their own payments to hospitals, the chargemaster often bears little resemblance to final patient bills. In the case of private insurance, those negotiated rates are confidential.

Lee Health’s president and CEO Larry Antonucci recently told board members who have grown skeptical of the practice that, despite the negative “optics” of annual rate increases, they are needed to keep up with costs. Poor patients, he said, usually get discounts.

“The reality is this room rate increase is primarily going to be paid for by insurance companies that pay us as a percentage of charges,” Antonucci said. “They’re not coming from artists and waitresses.”

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This 90-second video gives a brief overview of Lee Health's history, how the hospital system is structured, and its multiple health centers and clinics.
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Still, certain uninsured patients with higher incomes, tourists and those whose medical care is covered by auto insurance policies may find themselves responsible for those full prices.

And, as Antonucci alluded in his comment, the rates themselves are a factor in insurance pricing negotiations. As they increase, so potentially do the insurers’ costs and premiums.

Another fact that strikes some as unfair: Staying in nonprivate rooms costs as much as recovering in the hospital system’s private rooms. About a quarter of Lee Health's licensed beds are in nonprivate rooms.

“I think we need to be able to explain to my 93-year-old mother why we’re going to raise her room rates 5 percent, even if she shares a room,” said board member Donna Clarke during a September budget meeting.

In an interview later, Clarke said budget planners need to better explain the rationale for such annual increases.

"I think we need to understand specifically why. I'm still not convinced that we should be raising it 5 percent every year," Clarke said, adding that room quality and care has gone up with those costs: "There are more regulations than there used to be. The public is demanding more than they did before. And we understand more about health care."

Despite their doubts, the board voted 8-1 this fall to approve the rate increase. Clarke provided the sole vote against it.

Lee Health(Photo: Google Earth)

Where is that money going?

First, about that 5 percent increase: Spence estimates that, because insurers don't usually pay full costs and Lee Health treats many patients who cannot pay, that the hospital system only nets about 1 percent to 2 percent of it.

That translates this year into about $15 million, a tiny fraction of Lee Health’s overall $1.9 billion budget but roughly the amount the hospital system will spend on employee raises next year.

"I think 10 (percent) or 20 would be out of line," Spence said of increasing room costs. "And if you go 1 or 2 percent we would have challenges financially."

But $1,500 to $3,700 a day, just to stay in a hospital room? You'd find better deals staying at five-star hotels in the heart of Paris.

So where is all that money going?

A breakdown in costs

According to Lee Health, about half of the price — the largest share by far — pays for the highly trained nurses who care for patients around the clock. For patients receiving standard hospital care, there is an average of one nurse for every four or five patients. In the ICUs, it's one nurse for every two patients.

Here's how expenses broke down, on average, for last year's daily $1,394 stay in a standard hospital room:

Nearly $693 paid for the nurses. About another $234 went for other administrative and employee benefit costs.

Costs related to maintaining the hospital building itself, the medical equipment and monitors and the electronic medical records system accounted for about another $140.

The hospital food and dietary services added $124 to the bill. Laundry, linen and housekeeping were another $45. Medical supplies themselves only made up a meager $5 of the bill.

Social services, including postdischarge care services, cost about $35.60. The rest is spread out among a number of other miscellaneous expenses.

About $39 of that amount is what the hospital system takes away as profit.

Lee Health does not appear to be off the mark in calculating its expenses. According to 2016 data collected by the nonpartisan Kaiser Family Foundation, the average daily cost for hospitals to treat a patient in Florida was $2,091.

Some hospital systems, including Lee Health, make their chargemaster prices easily available to the public. Others do not.

Daily room rates at NCH Healthcare System, which operates the largest hospitals in Collier County, are between $1,358 and $1,633, depending on the room type. Private rooms cost more.

Room rate increases, a forgotten history

Hospitals boards typically don't set room prices by a separate vote, just like they don't do so with, say, the cost of aspirin.

Lee Health's governing board does so because of a judge's order in a barely remembered state circuit court lawsuit involving a dispute over pricing that, it is believed, traces back to the 1970s.

The case is so forgotten that the board's 28-year attorney isn't sure of the parties involved, the arguments made and even the specifics of the legal order. That attorney, Jim Humphrey, said he's not even convinced that the order is still binding.

The News-Press asked Lee Health's legal department more than three months ago if it could find that original case. As of this week, it could not.

Even so, it will continue to be enforced, Humphrey said.

"My opinion is that the health system board of directors should be required to follow it," Humphrey said. "Even though it's been (at least) 30 years I'd like to make sure that my clients, being the health system board, are adhering to the court decisions as I remember and as I have explained to them for 28 years."

Eliminating the annual votes on room rates would not likely result in lower medical bills. That cost of doing business, and the need to take in more money than it spends would be simply be rolled into the overall spending plan the board approves every year.

Though Lee Health is a public institution it does not receive direct public financing like similar institutions, such as the Sarasota Memorial Health Care System.

Said hospital spokeswoman Mary Briggs: “We don’t get any tax dollars, so we always have to have a margin or we’re going to cease to exist and that care would leave the community.”